OPERATOR: Good afternoon, and thank you for standing by. At this time, all participants are in a “listen-only” mode. After the presentation, we will conduct a question and answer session. To ask a question at that time, please press *1 and record your first and last name. Today’s conference is being recorded. If you have any objections, you may disconnect at this time.

I would now like to turn the call over to your host, Mr. P.J. Crowley, Assistant Secretary of State for Public Affairs. Sir, you may begin.

MR. CROWLEY: Thank you very much. And good afternoon and thank you for joining us. I’d like to give you some background information on the announcement today regarding the sale of arms to Taiwan.

We have two Senior Administration Officials here that can help you go through any particulars that you have on the items themselves, the rationale for it, the history of our arms sales to Taiwan. We believe very strongly that this is consistent with our “one-China” policy, in line with the Taiwan Relations Act, and contributes to stability in the region.

At this point, I’ll turn it over to Senior Administration Official Number One, who can make some very brief opening comments.

SENIOR ADMINISTRATION OFFICIAL ONE: Good morning, everybody. The Administration today notified Congress of the sale of defensive articles and services to Taiwan under the Foreign Military Sales program. For more than 30 years, through both Democratic and Republican administrations, the United States has provided Taiwan with arms it needs to defend itself. And by doing so, we’re helping to ensure stability in the Taiwan Strait and throughout the region.

MR. CROWLEY: I’ll tell you what, does Senior Administration Official Number Two wish to make any opening comments; otherwise, we’ll go to your questions?

SENIOR ADMINISTRATION OFFICIAL TWO: Well, just to say that today was a formal notification to Congress of this. There are 30 days – there’s a process of 30 days where it is in Congress’s lap to raise questions or concerns. But after the 30 days without any comment, it automatically enters into force. So today is the notification. It’s on the website of the Defense – the DSCA, which is a DOD component. That was done about maybe an hour ago, and that is now for public consumption.

So that’s all, I think.

MR. CROWLEY: Okay. Operator, we’ll open it up for questions at this point.

OPERATOR: Thank you. The first question comes from Jim Wolf. Your line is open.

QUESTION: Thank you. Can you hear me?

SENIOR ADMINISTRATION OFFICIAL ONE: We can.

QUESTION: Okay, good. The – I want to ask about F-16s. Taiwan officials have said repeatedly that they would like to obtain 66 F-16C/Ds. The U.S.-Taiwan Business Council says that administrations – U.S. administrations have three times refused to let Taiwan submit a letter of request, a formal step in the arms for sale – FMS process. What is the Obama Administration’s policy on responding to Taiwan’s expressed desire to buy the F-16s?

SENIOR ADMINISTRATION OFFICIAL ONE: We’re aware of – well aware of Taiwan’s interest in acquiring F-16 aircraft, and we have discussed that with them on a variety of occasions. And we’re in the process of assessing Taiwan’s needs and requirements for that capability.

QUESTION: Do you have any sense of how long that will take? It’s been years that the administrations have said similar things.

SENIOR ADMINISTRATION OFFICIAL ONE: I’m not in a position to give you a sense of how long that’s going to take right now.

QUESTION: Thank you.

OPERATOR: The next question comes from Shaun Tandon. Your line is open.

QUESTION: Yeah, thank you. I wanted to see what consultations, if any, took place with Beijing ahead of time. I know that the Administration has been quite keen to preserve relations. Have there been any consultations that have gone on ahead of time, ahead of this decision? And is there confidence that relations could stay stable with Beijing despite this?

SENIOR ADMINISTRATION OFFICIAL ONE: We don’t consult with Beijing in the sense of asking their permission or anything like that. We notified them of our decision this morning.

QUESTION: Sure. And in terms of the –

SENIOR ADMINISTRATION OFFICIAL ONE: In other words, we informed them in advance of formal notification this morning.

QUESTION: Sure. And in terms of the reaction that you can gauge – I mean, do you think that there could be a reaction that would be beyond pro forma, something that would set back relations? Or do you have any – are you confident about how things will take place?

SENIOR ADMINISTRATION OFFICIAL ONE: Well, as Secretary Clinton has said in the past, we have a very mature relationship. We think we can get through issues like this. We have a lot of other issues with China and other common interests that will continue – we expect we’ll continue to explore with them.

QUESTION: Thanks.

OPERATOR: The next question comes from Foster Klug. Your line is open.

QUESTION: Hello, thanks for doing this. I had a question about Congress. How long do they have to comment or weigh in on this?

And then if I could try to follow up on Shaun’s question a bit, China cut off military-to-military ties after the 2008 announcement. Do you see that as inevitable, specifically that retaliation, this time? And do you plan to continue talks with China about this in an attempt to either cut that off or to try to manage their reaction? Thanks.

SENIOR ADMINISTRATION OFFICIAL ONE: Well, as I said, the Congress has 30 days to comment on this. We don’t expect there to be necessarily any reaction, but they have 30 days to raise concerns or comments. So it’s a 30-day process at the end of which, if there are no comments, it automatically takes effect.

SENIOR ADMINISTRATION OFFICIAL TWO: With regard to what the Chinese may do, they certainly have expressed their concern about this sale. They have not shared with us explicitly what they intend to do in response. Of course, they temporarily cut off military-to-military exchanges in response to the October 2008 notification. It may be that they’ll cut off military-to-military exchanges. We think there are lots of good reasons why they shouldn’t, and we’ve been telling them that.

QUESTION: Hello, can you hear me?

SENIOR ADMINISTRATION OFFICIAL TWO: Yes.

QUESTION: Can I follow up just real quick? Is it fair to look at this as sort of a gauge of whether the Obama Administration’s approach to China is working? That, if the relationship is as mature as officials say it is, that that wouldn’t be something that they’ll do, that they’ll handle this differently this time?

SENIOR ADMINISTRATION OFFICIAL TWO: Well, I’m not going to – I can’t predict what the Chinese may or may not do. But President Obama and President Hu agreed in London last year that we’d pursue a positive, cooperative, and comprehensive relationship. I think the Chinese take that very seriously and are aware of our commitment to that, and that we’ll carry on after this.

SENIOR ADMINISTRATION OFFICIAL ONE: And if – I should add in London, they specifically said that there would be a commitment to military-to-military relations. And since then, there’s been a meeting of a – the vice chairman of the central military commission Xu Caihou to the United States to see Secretary Gates. There have been a number of meetings to look at rules of the road in common sea and air space around the South China Seas, China Sea, so we can make sure that we de-conflict as we operate more and more in common areas. So a rather robust, a rather useful development in mil-to-mil relations that we have developed. And I will leave it at that.

OPERATOR: The next question comes from Paul Eckert. Your line is open.

QUESTION: Thank you. Can you maybe discuss some of the security considerations, in other words, Taiwan’s security needs that led to this decision at this point? And in particular, although Beijing and Taiwan are now talking under the current Ma government in Taipei, China hasn’t really stopped its missile buildup across the Taiwan Strait directed at Taiwan. Is that a factor in your discussions with China over this – over these Taiwan weapons sales?

SENIOR ADMINISTRATION OFFICIAL TWO: Well, obviously, all these – I mean, the Department of Defense follows very closely the threat environment and military modernization on the mainland. And as stated in the Taiwan Relations Act, this is the basis upon which we decide what to sell to Taiwan for their legitimate self-defense needs, for sufficient self-defense. So of course, there is a connection between what Beijing does in its modernization and the threat they pose to the island, and the types of sales that we authorize that we today notified. You’ll see on there, for instance, C4ISR capabilities and lift capabilities offshore, helicopters and such, and mine sweepers. So it does directly address many of the things that we see as making Taiwan more vulnerable and what they need for their own self-defense, absolutely.

And we do bring up the question of their missile development as part of that overall threat to the island. It’s only one component, but the missiles certainly are of concern.

QUESTION: Thank you.

OPERATOR: Once again, if you would like to ask a question, please press *1. The next question comes from Viola Gienger.

QUESTION: Hi. This is Viola Gienger from Bloomberg News. Can you tell me a little bit more about how exactly you notified China this morning, and in what sort of way, what sort of forum? And how – did this come up at all in David Shear’s meeting with the DCM, the Chinese Embassy, a couple of weeks ago? Was there any sort of – just a little heads-up to them to let them know? Was there any informal heads-up to China to let them know about this in – prior to the formal notification this morning?

SENIOR ADMINISTRATION OFFICIAL TWO: We called in an official from the Chinese Embassy to inform him of our decision this morning. And there were no previous heads-ups to the Chinese on this.

QUESTION: Okay. And can I just follow up a little bit regarding the military-to-military relations with China? Has the issue of Taiwan come up in any of those discussions, and in what way?

SENIOR ADMINISTRATION OFFICIAL ONE: Taiwan is always in the discussions in some form. I mean, they consider this – quote – “their core interest.” And it’s been – we sort of get used to the fact that Taiwan is a component of the way they think about their interests and their relationship with the United States. So yes, of course, it does come up.

But again, we have some very serious issues, as with the entire relationship, that we need to be working with them on for peace and stability in the region and for just overall development of our common interests. So we would hope that we can agree to disagree on this question, but continue with an outline of exchanges, of contacts, of initiatives on the mil-to-mil front over the next year to that end.

QUESTION: Thank you.

OPERATOR: The next question comes from Warren Strobel. Your line is open.

QUESTION: Thank you. Two sort of interrelated questions. You said there was no sort of heads-up of any kind to the Chinese, but Secretary Clinton met with Foreign Minister Yang in London, I believe it was yesterday, and I’m just wondering if this came up, even in passing. And secondly, one of her priorities and President Obama’s priorities is sanctions on Iran, to which China is very skeptical right now. And I’m wondering how much concern there is that this action by the United States Government might cause China to be even more skeptical.

SENIOR ADMINISTRATION OFFICIAL TWO: (Inaudible) we discuss Taiwan in general terms with the Chinese frequently. The Chinese raise it with us frequently. I actually don’t know if it was discussed in the meeting with Foreign Minister Yang yesterday. We’ll have to get back to you on that.

With regard to Iran, we think China has a strong interest in an Iran that adheres to its obligations under the Nonproliferation Treaty. And they have said so, and we work closely with the Chinese in the context of the P-5+1 on this and we’re working with them right now to try and move things forward on Iran. So we’re going to have a tough negotiation and working with China is going to be part of that.

QUESTION: Thanks.

OPERATOR: The next question comes from Daniel Dombey. Your line is open.

QUESTION: Thank you very much, indeed. Gentlemen, just two questions if I may. First of all, to what extent does this come at a particularly sensitive time, given the recent dispute about Google, the imminent meeting between the President and the Dalai Lama, and so on? To what extent does it come at a particularly intense time about – for U.S.-Chinese relations?

And secondly, if you could, I’d just like you to underline the importance of and the utility of those military-to-military relations and contacts, and why the Administration has placed such a premium on resuming them.

SENIOR ADMINISTRATION OFFICIAL TWO: Well, again, as Secretary Clinton has said, we have a very mature relationship with the Chinese. Issues like this come up from time to time, and on the basis of our understandings with the Chinese about good bilateral relations, we try to address those issues as they come up. So I don’t think this will have a fundamental effect on the bilateral relationship as a whole.

SENIOR ADMINISTRATION OFFICIAL ONE: And on the question of mil-to-mil and the benefits of it, there’s a lot of understanding that we need between the two sides. I mean, we – the PLA is a rather insular organization. And I think it’s worthwhile having exchanges, piercing some of the misconceptions and building ties in that way. I think there’s a great deal of usefulness in those initiatives. And on the practical side, I mean, there are things this year like military medical, military engineering exchanges, mid-level cadet exchanges, and again, as I mentioned, that military maritime stuff where we are talking very seriously about making sure that we have the right signaling on the high seas and in the air so that we don’t have a misunderstanding leading to conflict.

So at all levels, I think mil-to-mil is an essential component of the overall relationship. To not have one would certainly be not helpful, would send a wrong signal to the region, to Asia. They want to see it occur. And we’re committed to continuing it and sustaining it.

QUESTION: And just to follow up, you talked about piercing misconceptions. How would you describe those misconceptions? What kind of misconceptions are you talking about there?

SENIOR ADMINISTRATION OFFICIAL ONE: Well, we don’t – I don’t think there’s anything specific about it. I mean, there are still concerns they have about is the United States containing China, what is the United States doing in terms of its basing in the region, why is it doing it – fundamental strategic aspects of what each side is doing. We have a lot of questions about China – why is it modernizing its military, why is it developing certain capabilities that we find to be challenging.

And so, I mean, both sides, given our size and our presence in Asia, need to have a consistent dialogue on this so that people at all levels are reassured that China’s rise is indeed peaceful and that our intentions are indeed not contrary to China’s. And I think the only way to do that is face-to-face dialogue and constant contact and building of relationships.

QUESTION: Thank you.

OPERATOR: Our next question comes from Peter Spiegel. Your line is open.

QUESTION: Yes, thank you, and I apologize. I got on the call a little bit late. Could I just ask you to – if there was a total dollar value put on the package that is being announced to Congress today, if you could address that real quickly?

More substantively, folks in the analyst community have been surprised – at least they said they’re surprised – about the vehemence to which the Chinese – the mainland Chinese have been arguing against this ahead of the announcement. I think in their words, they were a bit surprised, particularly given the – some of the outreach between the KMT and Beijing, that they had been so vehement in their objections. And there’s some speculation that the Chinese, seeing themselves as sort of economic rising and military rising, feel they could use their new power to affect your decision making on this front.

I guess that question is twofold, then. One, Is that your interpretation of the reaction ahead of this from Beijing, that it is more vehement than perhaps you suspected? And B, to what extent did that affect your decision-making process as you looked at this package?

SENIOR ADMINISTRATION OFFICIAL TWO: The package is $6.4 billion. With regard to the Chinese reaction, the Chinese, of course, are concerned about it. They’ve expressed those concerns to us, both in general terms before we made the decision and since we notified them as well. I don’t think their reaction goes beyond what we expected. And again, we have lots of – a broad range of interests and common interests with the Chinese and we expect to continue pursuing those interests as we move forward.

QUESTION: Could I just ask a follow-up? Again, I caught the call late. I realize this is a background briefing. Were the two briefers identified even for background purposes at the start of the call?

SENIOR ADMINISTRATION OFFICIAL ONE: No.

QUESTION: Is that possible to get that?

SENIOR ADMINISTRATION OFFICIAL ONE: No. (Laughter.) Yes, we’ll get it to you.

QUESTION: Okay. Thank you.

OPERATOR: The next question comes from Viola Gienger. Your line is open.

QUESTION: Yes, I’d like to second Peter’s request for the IDs and --

SENIOR ADMINISTRATION OFFICIAL ONE: We’ll do it at the end.

QUESTION: -- Official One versus Official Two.

SENIOR ADMINISTRATION OFFICIAL ONE: Sure.

QUESTION: That would be great. And also, what concrete progress do you feel you’ve made in mil-to-mil talks since they started back in July?

SENIOR ADMINISTRATION OFFICIAL TWO: Well, we were just starting up again. I can’t say there was a huge move forward, and we’re not looking for great breakthroughs. What we’re looking for is a constant process, a consistent process, a sustained process. We did have, as I say, a senior visitor from the Central Military Commission come, and I thought it was a very productive visit and established the groundwork for a potential return visit at some time in the future from the United States.

So there was a degree of momentum that we had established after a very slow start after the last arms sales round. So we made decent progress, but this kind of thing is a long-term initiative.

SENIOR ADMINISTRATION OFFICIAL THREE: I would also add that in addition to the high-level visits, one can’t underestimate the role of some of the working groups that take place to discuss things associated with naval issues, maritime issues. And those meetings have taken place periodically and they give us an opportunity to explain our role, our views on maritime security. And they’ve been – they’ve served as also both a pressure valve and also an opportunity to explain each of our positions.

MR. CROWLEY: I should say at this point we’ve been joined by Senior Administration Official Number Three, who was just speaking. We’ll identify all of them at the end.

OPERATOR: The next question comes from David Sanger. Your line is open.

QUESTION: Thanks. You were asked earlier about the possible effect on the Chinese in their response on Iran, and made the argument, as we’ve often heard, that it’s in China’s interest to keep Iran within the Nuclear Nonproliferation Treaty and abiding by all of its provisions. But just a few hours ago, Secretary Clinton gave a fairly bald warning to the Chinese about both the economic insecurity and the diplomatic isolation they would face if they did not agree to the new sanctions.

And I’m just wondering the degree to which you timed this announcement. I mean, obviously you knew where she was going to be and what she would be involved in this week as she’s been making Iran the sub-theme of the European trip that’s largely been on Afghanistan.

MR. CROWLEY: David, P.J. here. I would not read anything into the timing of this announcement. There’s a longstanding, ongoing process regarding these kinds of initiatives regarding arms sales, but this is not tied to where Secretary Clinton was going to be this week or her meeting with Foreign Minister Yang. Each of these is on a separate track.

I think Secretary Clinton – in terms of her point about economics, there’s a perception that perhaps in some of its dealings with Iran, China may think that it does not – it will not be affected if Iran ultimately introduces a nuclear weapon into the Middle East, and we would disagree with that. Obviously, in the aftermath of a nuclear Iran, you’ll have significant decisions that other countries in the region would have to make. And that is going to have an impact on oil markets, and those oil markets are among – China depends on those oil markets just like anybody – any other major economy does.

So at the end of this calculation, as we go through the P-5+1 process, China will have to fully appreciate the implications of the path that Iran is on. And that’s why, as the Secretary also said during her trip, there is an openness that she feels within the Chinese leadership. While they have their traditional view on sanctions, that they – we will continue this conversation.

SENIOR ADMINISTRATION OFFICIAL TWO: Can I add one other thing, David, just to that?

QUESTION: I’m sorry. Who’s this?

SENIOR ADMINISTRATION OFFICIAL TWO: Another Senior Administration --

QUESTION: Oh. Okay.

SENIOR ADMINISTRATION OFFICIAL: -- Official. And an expert fisherman.

QUESTION: Oh. Got it. Okay, now I’ve got the voice. (Laughter.)

SENIOR ADMINISTRATION OFFICIAL TWO: So the other thing that’s important to underscore is that this has more to do with Iran than it does with China. But the diplomacy surrounding the overall strategy with Iran extends beyond the P-5+1. So, for instance, in recent high-level meetings with other key Asian countries, the Secretary and others have underscored – for instance, Japan and others – that the next step will involve a more comprehensive set of stakes, taking affirmative actions, and that we are looking to support from key states like Japan in this process.

QUESTION: Thanks.

OPERATOR: The next question comes from Jim Wolf. Your line is open.

QUESTION: Yeah. On the arms sale, I wonder what you can say about the status of President George W. Bush’s offer to supply help for obtaining diesel electric submarines. That’s not part of the package again, and there had been talk of breaking it into two parts with the design phase. Whatever happened to that?

SENIOR ADMINISTRATION OFFICIAL ONE: Well, nothing has been ruled in or ruled out. We continue to evaluate Taiwan’s defense needs, including the maritime front. And I just say that’s a component, but we continue to evaluate Taiwan’s defense needs in that regard.

QUESTION: Is there any truth to the readout, for instance from Rupert Hammond-Chambers of the U.S.-Taiwan Business Council, that a decision was made to skip it now because of a lack of consensus among Taiwan leaders about whether to go ahead with the submarines?

SENIOR ADMINISTRATION OFFICIAL ONE: I don’t think we can comment on that at this juncture.

MR. CROWLEY: We probably have time for one or two more questions.

OPERATOR: The next question comes from Stephen Kauffman. Your line is open.

QUESTION: Thank you. I was just wondering if one of you all could articulate maybe just the broader policy rationale that you’re working with the arms sales. Is this more about the – our relationship with Taiwan, or are we really trying to maintain more of a strategic equilibrium of sorts in trying to maybe deter China from armed action? Thank you.

SENIOR ADMINISTRATION OFFICIAL ONE: Thank you. That’s a critical and important question. I would say, first and foremost, at the strategic level, national law and the strategic interests of the United States require us to provide the defensive capabilities and also the wherewithal in the United States to deal with any challenges to the peace and stability across the Taiwan Strait. And we take that responsibility very seriously, as underscored by the decision to move ahead with this package today.

We have also tried to underscore in this briefing that it is in the U.S. interests to have a strong, productive, positive relationship with China. And in addition, we support the dialogue that has taken place in recent years across the Taiwan Strait. And our general argument would be that the provision of necessary defense items to Taiwan not only meets an urgent requirement in terms of dealing with the military challenges across the Taiwan Strait, but also provides the Taiwan leadership with the confidence and the understanding that the United States provides a critical support to Taiwan, and that gives them greater confidence and ability to interact across the Straits in peaceful dialogue with their PRC counterparts.

And lastly, I think the arms sales makes clear, not just in this context but in Asia as a whole, that the United States stands by its commitments and that others that depend on the United States for the maintenance of peace and stability can be reassured that our support is unwavering.

QUESTION: Thank you.

OPERATOR: The next question comes from Carl Sears. Your line is open.

QUESTION: You were just referring to the confidence-building aspect of this arms sale. But in terms of a strategic objective, how do we calibrate that? Is this – is our intent to provide Taiwan the ability to deter, repel, and survive a Chinese attack? I mean, can you speak to that baseline, that benchmark?

SENIOR ADMINISTRATION OFFICIAL ONE: Look, I think our fundamental goal through everything we do – diplomatically, strategically with our forward deployments, with our mil-to-mil engagement with China, with our partners in the region, our unofficial relationship with Taiwan – our primary goal is the maintenance of peace and stability across the Taiwan Strait. And we believe that all of our efforts in this respect must underscore that central objective.

There are other operational matters associated with if that condition no longer pertains. But our fundamental effort in all that we do is to ensure that peace and stability that has, in many respects, been the basis of China’s enormous progress, Taiwan’s effective growth and democratization, and generally a peaceful situation in Northeast Asia for decades.

MR. CROWLEY: We’ll take one more.

OPERATOR: The next question comes from Daniel Dombey. Your line is open.

QUESTION: Thank you. Just one more. I just wanted to see, just to put it into a broader context, to what extent are your concerns about where these kind of sales can lead in terms of relations between Washington and Beijing assuaged or diminished by the fact that we no longer have a government that is holding referendums on maybe joining the UN or whatever, and that relations have obviously warmed up a little bit between Beijing and Taipei. How does that factor into your calculations of the fallout, if not the decision itself?

SENIOR ADMINISTRATION OFFICIAL ONE: Well, look, let me just say just two things. First, we do not take a position on the democratic process or outcomes of our friends or partners. So we would have nothing to say, generally, about that in Taiwan or elsewhere.

However, it is also the case that we see the dialogue that has evolved in recent years between China and Taiwan as essentially a promising one. We support it. And it is also the case that even in the context of these announced arms sales, the U.S. Government at the highest levels has made very clear that we desire a strong and durable relationship with Beijing, and that we believe that following through on our responsibilities and commitments sends the appropriate message to all concerned.

MR. CROWLEY: Thank you very much. We – this – we have to complete the call at this point, and we thank you for participating.